Enlightenment Through Understanding

Jim Simons: A rare interview with the mathematician who cracked Wall Street

November 14, 2015

Pretty impressive. His strategy is to sift through immense quantities of data to find patterns and then exploit these patters until they stop working. However, the Renaissance Medallion fund since 1993 has been closed to to the general public and is only available to employees of Renaissance Technologies.

The computer-driven Medallion fund has made an average of 34% a year after fees since its launch over 20 years ago. Since the firm bought out the last investor in the Medallion fund in 2005, there’s no information on the fund’s returns since then. Out of the 148 months that elapsed between January 1993 and April 2005, Medallion only had 17 monthly losses. Out of 49 quarters in the same time period, Medallion only posted three quarterly losses. Medallion has had no loss-making years apart from its only one in 1989 during the 1993 – 2005 period.[23]

The fact his fund was able to make such great returns so consistently defies any statistical ‘luck’.

The George Soros quantum fund, also closed to the general public, is perhaps the only fund that comes close to matching the performance of Medallion. Although Quantum amassed slightly more money than Medallion, it had a 10-year head start.

But the left says the market is rigged, a scam, and a bubble. These returns should not be possible, but they are, and I doubt Jim Simon’s story is unique. There are probably hundreds of traders quietly making small fortunes in the markets, applying their intellect to find subtle patterns and inefficiencies in the sea of noise; for example, a Japanese trader that made $34 million, and others:

Using highly leveraged financial instruments such as futures and options, it is possible to turn thousands of dollars into millions in a short period of time. There are thousands of professional traders and fund managers who have achieved consistent, market-crushing returns, although they don’t go around bragging about it. The most famous examples are Warren Buffet and Jesse L. Livermore. Another is Richard Dennis, who in just ten years turned $1,600 into $200 million. Although the methods Dennis employed stopped working in the 80′s and 90′s, he was smart and savvy enough to find and exploit inefficiencies in the market to make an enormous windfall. There are many other stories like this 20-something penny stock trader. Although he cost his firm over $100,000 in a single day due to a botched trade, he turned his personal account of just thousands of dollars into hundreds of thousands of dollars in the span of six or so years. Jim Simons’ quant Renaissance Medallion fund has annual compounded returns of over 35% – turning an initial seed investment of a couple million into over $25 billion in just under three decades. Timothy Sykes, a well-known daytrader, turned his $12,415 Bar Mitzvah gift into $2 million. All of these examples show that, yes, you can get rich quickly trading. Mohammad’s returns were not impossible, as many immediately assumed.

Studies have also found that funds run by managers with high SAT scores tend to have better performance.